WASHINGTON: A burst of hiring in February added 236,000 US jobs and slashed the unemployment rate to 7.7 percent — a four-year low. The strong job growth showed that American employers are confident about the economy despite the fiscal austerity triggered by higher taxes and government spending cuts.
The jobs report issued yesterday provided encouraging details: Job growth has averaged more than 200,000 a month since November, wages rose, and the job gains were broad-based, led by the most construction hiring in six years.
The report was good news for the Obama administration: The jobless rate dropped to the lowest level since President Barack Obama has been in office.
And the upbeat jobless report fits with other big economic news of recent days: Surging stock prices and steady home-price increases that have finally allowed Americans to regain the $ 16 trillion in wealth they lost to the Great Recession. The gains are helping support the economy and could lead to further spending and growth.
Stock futures rose on the report, putting the Dow Jones Industrial Average on track for a fourth straight record close.
Still, White House economist Alan Krueger noted in a statement yesterday that the new unemployment rate was measured before $ 85 billion in automatic budget cuts started taking effect. The administration has warned that the cuts could have a negative impact on employment and economic growth.
The jobless rate had been stuck at 7.8 percent or above since September. The rate declined last month because the number of unemployed fell 300,000 to just over 12 million, the fewest since December 2008. More than half the decline occurred because 170,000 of the unemployed found jobs. Another 130,000 gave up on their job searches. People who aren't looking for jobs aren't counted as unemployed.
The unemployment is calculated from a survey of households, while the job gains come from a survey of employers.
Employers added slightly fewer jobs in January than the government had first estimated. Job gains were lowered to 119,000 from an initially estimated 157,000. Still, December hiring was a little better than first thought, with 219,000 jobs added instead of 196,000.
Robust auto sales and a steady housing recovery are spurring more hiring, which could trigger more consumer spending and stronger economic growth. The construction industry added 48,000 in February and has added 151,000 since September. Manufacturing has gained 14,000 last month and 39,000 since November.
Retailers added 24,000 jobs, a sign that they expect healthy consumer spending in the coming months. Education and health services gained 24,000. And the information industry, which includes publishing, telecommunications and film, added 20,000, mostly in the movie industry.
The economy is also benefiting from the Federal Reserve's efforts to keep interest rates low. Lower rates have made it easier for Americans to afford new homes and cars. The Fed has said it will keep the benchmark rate that it controls near zero until unemployment has fallen to 6.5 percent, as long as inflation remains in check.
"This may not yet be the substantial improvement in the labor market outlook that the Fed is looking for, but it's moving in the right direction," Paul Ashworth, an economist at Capital Economics, said in a note to clients.
So far, higher gas prices and a Jan. 1 increase in Social Security taxes haven't caused Americans to sharply cut back on spending.
Across-the-board government spending cuts also kicked in March 1 after the White House and Congress failed to reach a deal to avoid them. Those cuts will likely lead to furloughs and layoffs in coming weeks.
The impact of the tax hikes is partly being offset by higher pay: Hourly wages rose 4 cents to $23.82 last month. Wages have risen 2.1 percent in the past year, slightly ahead of inflation.
A big source of strength has also been home sales and residential construction: New-home sales jumped 16 percent in January to the highest level since July 2008. And builders started work on the most homes last year since 2008.
Home prices rose by the most in more than six years in the 12 months that ended in January. Higher prices tend to make homeowners feel wealthier and more likely to spend.
SOURCE: THE ASSOCIATED PRESS
Reproduced with permission from Arab News